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Things to know before you apply for a personal loan

All of us are aware of the fact that a personal loan can help meet several needs. It is a low interest loan that can be used for different purposes and will ensure that you easily make a large payment. However, before applying for the loan, you must have all the relevant information about it. It will not only improve the chances of your loan application being approved but will also help secure a low interest loan.

When you apply for a personal loan there are several things that you need to consider including the credit score, fees and charges and rate of interest. If you examine these criteria, you will be able to get a loan that works best for you. It will also prevent you from approaching a wrong lender or borrowing more than you need. Before you proceed to personal loan apply, here are some things you need to keep in mind.

Have a solid credit history

Your credit score is a number that will represent your credit worthiness and it shows the lender that you are capable to make the repayment on time. The score will range from 300 to 900 and a high score means a higher ability to make the repayment. A low credit score shows that you cannot repay the loan in time and this could lead to a rejection of your loan application or you may have to pay a high interest on the loan. It is advisable to maintain a solid credit history by paying your dues on time. You can reduce the number of credit cards and ensure that you pay all the outstanding dues on the existing card.

Check interest rates

Lenders have varying interest rate on the loan. It is best to compare the same online before you make a loan application. The rate of interest will also be based on your credit score and it can make a huge difference to the outflow. A low interest loan will reduce the overall cost of borrowing and make it easier and convenient for you to repay the loan in due time.

Consider all the costs

The interest is not the only cost associated with the loan. There are other costs including processing fees, documentation costs and prepayment penalty. These costs will add up to the total cost of borrowing. Hence, before you apply for a loan, always consider all the costs and compare the same between different lenders to make the right decision. It will help decide if the loan is affordable or not.

Choose a loan amount

Since a personal loan can be used for different purposes, it is important to think of your needs and then come at a loan amount. This means you will have to identify the purpose of borrowing and then estimate the amount you need. Make a list of the expenses you need to pay for and then prioritise them. You will come to the borrowing amount easily. If it is a home renovation you need to pay for, consider all the costs associated with it and then apply for the loan.

Use the EMI calculator

Before you sign on the loan documents, you need to consider your ability to make the repayment. You will have to direct your income towards EMIs for the entire tenure of the loan. Hence, use the EMI calculator to get an insight into the amount you will have to pay every month. The calculator needs two inputs- the loan amount and tenure. Based on the same, it will show results and you will be able to decide if the EMI is manageable or not.

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Avoid falling for offers and plans

You may come across several lenders in the industry who offer discounts and plans but could be  gimmicks and you must avoid them. If you read the fine print of the loan, you will notice that the loan turns out to be very expensive and a lot of times they are based on floating rates of interest.

Keep these points in mind when you go ahead with personal loan apply. It helps to be very clear about where you intend to use the funds and how you plan to repay the same. The loan will serve different purposes but you need to plan in advance and approach a lender accordingly. Do not rush the process. Take your time and research about the features and interest rates on the loan before making an application. Timely repayment of the loan will help build a solid credit score and it will become easier to get a loan approval in the future. These steps will help prepare for the loan application and will ensure favourable terms and instant approval.

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